Storage biggies lining up to buy Seagate?

New York Post gets excited

Comment It's either on the button or way over the top; a possible buyer for Seagate could be one of rivals Western Digital, Toshiba or Samsung.

That's reported by the New York Post, and the report follows on from Wall Street speculation that Bain Capital has withdrawn from the private equity bid consortium being put together by TGP Capital to take Seagate private.

There have been widely reported stories that TGP is aiming for this against a background of the steady rise of NAND flash storage as an alternative to hard disk drive storage, and the coming costly disk drive technology transition from today's perpendicular magnetic recording to a follow-on technology that can go past 1Tbit/in2 and possibly reach 4Tbit/in2

It has always seemed logical that, in a disk drive industry where unit volume is the key to profitability, further consolidation of suppliers is more likely than a private equity group taking over Seagate. The private equity ownership route is generally the way for a previously publicly-owned company to do major corporate restructuring, before coming back to the market and making a lot of money for its private equity backers.

The apparent problem facing TGP and its partners is Seagate's projected revenues, meaning that it may not be able to service private equity debt en route to a flotation as well as fund whatever it is that it needs to do behind the private ownership wall.

It may be an unpalatable choice for Seagate's board though, selling the company to a rival instead of remaining independent. Acquisition by Western Digital, Toshiba or Samsung would be seen as a defeat. For Toshiba and Samsung, such a deal - buying one of the USA's crown jewels in technology terms - could be very attractive indeed. ®